Greg Warnock, founder of Junto Parnters, spoke at the UVEF meeting today.
I missed the first couple of minutes, but tried to take notes as best I could on my blackberry. Here they are:
Greg’s background: between 1988 and 1990 [dates might not be right] he started or funded 18 companies, including chemical, computer retail, selling cement edging, techsem(sic) labs which was a byu tech transfer deal, another company was a tech transfer deal from Cornell, another company had technology to monitor high volume freight.
Later, he invested in Knowlix, cofounded vSpring in 2000. This was something of a departure from pure entrepreneurship, but it was worthwhile. Our community needed this. But there were elements of entrepreneurship that he missed.
Without a grand scheme in mind, he invited 15 entrepreneurs to his home to discuss what gets in the way of people being entrepreneurs. He proposed telling them all he knew about entrepreneurship in 8 weeks, thinking that if they could just all work for themselves, this would be a cure for all job ailments. This discussion turned into Junto. Out of that group I selected 5. They named themselves Junto. Its hard to develop a peer group as an entrepreneur.
Failure comes from picking the wrong project, overcommitting to the wrong idea, or the lack of a little lubricating capital.
Q. Who funds the Junto group? A. The first year he did it. Last year he met Alan Hall. He has become committed to the Junto idea, so together they provided the capital for 2nd year’s groups of 10 Junto winners.
Q. What is the deal between Junto members and investors?A. We want it to become a self-sustaining model. When we run out of money, the first years’ should be returning to the fund.
Q. Does Junto get debt or equity in the startups?A. Primarily debt, but 35% equity is used to fuel future Juntos.
Introduction of Junto 2004
Brent Davis: His deal is a tool to sell to professional and collegiate sports teams, enabling them to communicate more with fans, and let fans track events they are planning to attend. The Junto model lets us look at a lot of deals, shut them down quickly if they don’t work. This idea works for him because local pro teams liked it, and it’s higher ticket, and it’s face to face sale. We sell it to teams as a subscription. They offer free downloads of our software to their fans. [He hasn’t heard of SportsNutz, which Steve Grizzelle said was sold recently.]
Brent Thompson, Agile Studios. He runs a software engineering firm, they do a lot with open source. He already had this going before he joined Junto.
Q. What did he get out of it?A. Four partners that are smartest, brightest people he has met, great networks, plus Greg’s endless network.
Clint Carlos, Garagemahall (sic). They do high end custom garage interiors. Cabinets, flooring, lighting. Has been doing this a few months. He looked at a lot of deals before settling on this. He sent roofers to Florida after the hurricane, trying to put them to work in the winter during their offtime. But there was a major bottleneck in supplies, so it didn’t work out.
Q. What is the consequence of failure to you? A. Probably mostly shame. I want to be one of the first millionaire’s in the group. I don’t want to have to work for one of these other guys. But if wasn’t part of Junto I would love to work for any of these companies because of their growth potential.
Q. If you succeed, how does money get distributed?A. I own majority of my company and a small piece of others, and Junto owns a piece. There is no personal guarantee on the $50,000, which you would never get from a bank.
Will Allred, Firepoll. I was working on a marketing related deal, when a friend told me that the research was taking too long. The internet is supposed to provide instant communications, so they build software that allows them to run surveys quickly and sell data to companies, ad agencies, market research firms, etc.
This week they helped a software company choose a name out of about 12 options. They charge by number of responses, usually $7 per response for a short survey. Most companies will buy 100 responses. Our cost is from incentives. We pay about a dollar (cash, mp3 files, etc.) to our end users for taking the surveys. Our sweet spot is consumers age 13-34.
Ryan Money, HireVue. He worked on this from almost the very start. He saw a report that 50% of people fabricate on resumes. We want to solve this problem. Greg Warnock said he hated job interviews. Sometimes in the middle of them he wants to end the interview so badly he feels like pulling out $100 and giving it to the candidate and just saying, “this isn’t going to work.” HireVue lets you see video clips of candidates before bringing them in. He hired a couple developers to build it, but they didn’t succeed. So in the meantime, while it was being developed, he bought a LoveSac franchise. He learned a ton by running this retail business. First, you get a ridiculous number of tax notices. He has also learned the rule of two: things always take twice as long, and cost twice as much as you think they will. I’ve learned a lot about having employees.
Benefit [of Junto] for me was having someone front the money.
One of our customers is an engineering firm in Canada. They used to fly people up. Now they do video interviews. They send cameras all over. We have a subscription model, like cell phone plan per minutes. We have some pods in call centers. Ave cost of goods is about 30%.
Q. What was the first thing you did when you found out you were a $50,000 winner? A. I saw it in email, I was ecstatic.
Q. What did you spend the money on?A. We are very frugal, free office space, commandeered other resources from wherever we could get them. Later we got some great space at LoveSac for about $200 per month, desks at DI. We got free biz cards at vistaprint.com. I got my software developed for equity, over 8 1/2 months with full time developers working on it.
Q. To Greg: what do you get out of this? A. I enjoy working with these guys, evenings, weekends, vacation time. Think of what happens if you sutract Huntsman, Sorenson, Eccles, Larry Miller from our economy, what happens to jobs, sports, arts, libraries, etc? I hope these guys become the next generation of business people that can benefit the community.
Q. How do you recruit?A. The first year he asked business school professors in the state for email addresses of their most passionate (not their smartest) students. He emailed them and asked them what they wanted to do the next 3-5 years, had them take an online personality profile, asked them if they had ever run a business before. From the responses he chose 15 for his first meetings.
Q. How does this scale?A. First year I had 35 candidates, invited 15 and chose 5 winners. The next year we had 85 applicants, held one class in the south and one in the north. We had 10 winners that year. There are now 15 active Junto partners.
Q. What next?A. It seems like there should be a master plan, but there really isn’t. I’m just taking this a step at a time.
Q. [Dave Politis] What is the best idea you didn’t fund?A. [Greg] The Junto candidates don’t come with ideas; they are selected for their capabilities, for getting stuff done. We test them on selling stuff (bottled water, LoveSacs), on organizing service projects, etc. Some people just get things done, others don’t.
Greg. Each Junto comes up with their own operating agreement, how much equity to split, how to release funds, where to office, what hours to work, etc. This would make fascinating case study.
A recent survey shows that the average time to rev in Utah startups is 14 months based on responses from 400 entrepreneurs.
The Junto winners know that the future funding for Junto will come from their successes. We can only do this for about 3 years, and then we will need to have funding come from prior years’ successes.
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